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Bankruptcy
The WestFar EastModern insolvency legislation and debt restructuring practicesFraudIn the United StatesChaptersIn CanadaDuties of trusteesCreditors meetingsConsumer proposals in CanadaIn EuropeIn the United KingdomIn the Netherlands
The WestFar EastModern insolvency legislation and debt restructuring practicesFraudIn the United StatesChaptersIn CanadaDuties of trusteesCreditors meetingsConsumer proposals in CanadaIn EuropeIn the United KingdomIn the Netherlands
The West
In the Old Testament of the Bible and Hebrew Scriptures, Moses' Laws prescribed that one "Holy Year" or "Jubilee Year" should take place every half century, when all debts are eliminated among Jews and all debt-slaves are freed, due to the heavenly command.Moreover, the Hebrew (or Jewish) law of debt forgiveness can be found in the Bible at Deuteronomy 15:1–2 which instructs a release of debt every seven years.
In ancient Greece, bankruptcy did not exist. If a father owed (since only locally born adult males could be citizens, it was fathers who were legal owners of property) and he could not pay, his entire family of wife, children and servants were forced into "debt slavery", until the creditor recouped losses via their physical labour. Many city-states in ancient Greece limited debt slavery to a period of five years and debt slaves had protection of life and limb, which regular slaves did not enjoy. However, servants of the debtor could be retained beyond that deadline by the creditor and were often forced to serve their new lord for a lifetime, usually under significantly harsher conditions.
The word bankruptcy is formed from the ancient Latin ''bancus'' (a bench or table), and ''ruptus'' (broken). A "bank" originally referred to a bench, which the first bankers had in the public places, in markets, fairs, etc. on which they tolled their money, wrote their bills of exchange, etc. Hence, when a banker failed, he broke his bank, to advertise to the public that the person to whom the bank belonged was no longer in a condition to continue his business. As this practice was very frequent in Italy, it is said the term bankrupt is derived from the Italian ''banco rotto'', broken bank (''see e.g. Ponte Vecchio''). Others choose rather to deduce the word from the French ''banque'', "table", and ''route'', "vestigium, trace", by metaphor from the sign left in the ground, of a table once fastened to it and now gone. On this principle they trace the origin of bankrupts from the ancient Roman ''mensarii'' or ''argentarii'', who had their ''tabernae'' or ''mensae'' in certain public places; and who, when they fled, or made off with the money that had been entrusted to them, left only the sign or shadow of their former station behind them.
Philip II of Spain had to declare four state bankruptcies in 1557, 1560, 1575 and 1596. Spain became the first sovereign nation in history to declare bankruptcy.
The characteristic discharge of debts was introduced to Anglo-American bankruptcy with the statute of 4 Anne ch. 17 in 1705, where the discharge of unpayable debts was offered as a reward to bankrupts who cooperated in the gathering of assets to pay what could be paid.